Unfortunately, it depends. If you have a Limited Liability Company (LLC), owners (called members) are generally not liable for the debts and liabilities of the LLC. For example, if your company was sued for $25,000.00, the other party could only collect from the assets of the LLC. The other party could not seek to hold the individual members liable or collect from the individual members (such as by trying to collect from the members retirement accounts or other personal assets).
However, this isn’t always the case. There is a concept known as “piercing the corporate veil.” This means that a court will not permit the owners to hide behind the limited liability of the company and will not hold the company members personally liable for the acts and omissions of the company.
This can generally happen in several ways including:
(1) Not performing your LLC’s annual filings
(2) Not maintaining internal formalities such as recording your annual minutes and maintaining a registered agent in the state of formation and all other states that your business does business in
(3) Not maintaining a written record of corporate decisions
(4) Not having the business adequately capitalized
(5) Commingling corporate assets and personal assets,
(6) Distributing corporate profits in a negligent manner,
(7) Not maintaining separate bank accounts for the company and for personal matters,
(8) Paying for business expenses with personal assets and paying for personal expenses with business assets,
(9) Not filing tax returns or not filing separate corporate tax returns and personal tax returns, jut to name a few.
This list is just a few examples of how an LLC can find its members held personally liable in a lawsuit. Therefore, several people find a benefit in hiring our office as their General Counsel.
For more information
If you have legal questions regarding your business or you are interested in hiring our office as your General Counsel, please contact our office at (513) 241-0400 to schedule an initial consultation. You can also fill out the contact form on our website and one of our attorneys will respond to you shortly.